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BEPS and Transfer Pricing

Austria: There is a 31 December 2017 deadline for calendar-year taxpayers required to file country-by-country (CbC) reports.

Malaysia: The deadline for filing CbC reporting notifications by some taxpayers is 31 December 2017 (that is, the notification as to which entity will be filing the CbC report).

OECD: An update reveals there are approximately 1,400 jurisdictions ready to participate in automatic exchange of CbC reports.

OECD: The latest edition of the OECD “Model Tax Convention” was released.

France: The French tax authorities officially announced a transition measure to address a situation when French companies/branches are held by an ultimate parent company located in a country that has not implemented a CbC regulation or the international exchange of information relationships that are formed through “qualifying competent authority agreements” (QCAAs) with France. If a parent company located in such a country or territory voluntarily files a CbC report for a fiscal year beginning from 1 January 2016, in accordance with the international standard, and that CbC report is transmitted by the foreign tax administration to the French competent authority, the subsidiaries or branches located in France will not be subject to the CbC reporting obligation.

Netherlands: The European Commission announced it has opened an in-depth investigation concerning two Dutch tax rulings that may have allowed a company to pay less tax and, thus, provided an “unfair advantage” over other companies, in breach of EU state aid rules.

Germany: A CJEU Advocate General issued an opinion about the German tax treatment (arm’s length adjustments) of income received by a German taxpayer from its business relationships with non-resident related companies even though similar adjustments would not be for income from business relationships between German (domestic) related companies.

Europe

EU: Proposals for a registry of “ultimate beneficial owners” have advanced, with agreements by the EU Council and EU Parliament.

France: A decision of an administrative high court presents opportunities for certain non-resident taxpayers to obtain previously denied refunds of VAT.

Netherlands: Because of changes in the tax law, taxpayers with advance tax rulings need to consider filing a new request for a tax ruling within a “reasonable” time in 2018.

Denmark: A CJEU Advocate General opinion—concerning the compatibility with EU law of the Danish withholding tax on dividends distributed to non-resident investment funds—concludes that the Danish law constitutes an infringement on the free movement of capital.

Germany: The CJEU issued a judgment in joint cases when foreign parent companies were exposed to the negative effects of the German anti-treaty shopping rule as it relates to dividends received from German subsidiaries. The CJEU found that the German provisions constitute an infringement of the EU freedom of establishment.

Germany: A revised position of the Ministry of Finance (BMF) concerns the value added tax (VAT) treatment of supplies of goods via consignment stocks. The new position applies in all “open cases.”

Norway: The tonnage tax system has been approved by the EFTA Surveillance Authority for another 10 years.

Luxembourg: The budget law for 2018 passed, with amendments made to three measures during the final legislative process.

Netherlands: The Dutch Supreme Court held that a request by Dutch “sister companies” to create a fiscal unity—when their common parent company was established in a third country (a country outside the EU and EEA)—did not have to be granted.

Asia Pacific

Australia: Guidance and a practice statement law was issued for the diverted profits tax.

Japan: An outline of tax reform proposals for 2018 has been agreed to by the ruling government coalition, with details expected to be subsequently unveiled in bills and tax law amendments, cabinet orders, and ministerial ordinances.

India: A tribunal held that a payment received by a foreign holding company from an Indian subsidiary on account of a corporate/bank guarantee was received by the taxpayer and was taxable in India. The fee did not fall within “interest” in view of the “other income” article of the India-UK income tax treaty.

India: The Supreme Court of India held that a subsidy in the form of a concession of the entertainment tax with respect to new multiplex complexes was capital in nature.

India: A tribunal held that an Indian company of a U.S. group did not constitute a permanent establishment in India under the India-United States income tax treaty because the taxpayer was conducting its operations from the United States and not from India.

India: The Supreme Court of India held that the taxpayer was not entitled to the benefit of deduction under Section 80-IB of the Income-tax Act, 1961 because it had lost its eligibility as a “small scale industrial undertaking” in subsequent years, even if in the initial year the eligibility criteria was satisfied.

Turkey: The rate for corporate income tax is scheduled to increase to 22% (up from 20%) for the tax periods 2018, 2019, and 2020. However, the Council of Ministers is authorized to reduce the 22% rate to a rate as low as 20%. There are also tax changes for the communications and finance sectors.

Exempt Organizations

A report examines provisions in H.R. 1 that would affect tax-exempt organizations and their donors.

The U.S. Tax Court issued an opinion holding that the fees that a tax-exempt organization (comprised of hospitals and a medical school) received from third-party vendors for debt-collection services and group purchasing programs were subject to unrelated business income tax because the payments made to the organization by the vendors were derived from an “unrelated trade or business” that the organization regularly conducted.

The IRS issued a reminder of the new due date for filing W-2 and W-3 for 2017 with the Social Security Administration, and Form 1099-MISC when reporting non-employee compensation payments in box 7, and concerning changes to Form 1098-T, Tuition Statement.

FATCA / IGA / CRS

OECD: A series of bilateral exchange relationships have been established under the common reporting standard (CRS) Multilateral Competent Authority Agreement (CRS MCAA), providing a total of over 2,600 bilateral relationships for the automatic exchange of CRS information.

Bermuda: An updated version of the tax information reporting portal user guide has been issued, providing an overview of the most commonly used functionality in the reporting portal with respect to entities meeting their reporting obligations under the CRS regime.

Guernsey: Guidance and further commentary has been issued on additional validations and corrections relating to FATCA and CRS reporting for 2016.

Trade & Customs

United States

A revenue ruling concludes that a package of films licensed to customers in the normal course of business may be an item for determining the domestic production activities deduction under section 199.

Proposed regulations address the tax treatment of foreign currency gain or loss of a controlled foreign corporation (CFC) under the “business needs exclusion” from foreign personal holding company income (FPHCI).

The Arkansas Office of Revenue Legal Counsel issued a legal ruling addressing excess inclusion income issues for holders of REMICs, and concluded that because Arkansas has adopted IRC subchapter M in its entirety, excess inclusion income must be included and reported for Arkansas income tax purposes.

The Indiana Department of State Revenue found that a real property listings database was not subject to sales tax and that the taxpayer was entitled to a refund of sales taxes paid on granting customers access to that data.

The Ohio Supreme Court held that a company engaged in the production of gift baskets qualified for a sales and use tax exemption for materials used in creating the gift baskets. The high court also addressed the taxability of the taxpayer’s labor charges.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

The KPMG logo and name are trademarks of KPMG International.
KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.
The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.